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Five food issues to watch out for

lead photo
JOHANNESBURG, 15 February 2013 (IRIN) - Who or what do you blame when
the price of maize seems to keep going through the roof? If you didn't
mention fuel subsidies, then you need to read this list of emerging
food issues in Africa.

Weather holds the balance: Global supplies of wheat and maize remain
tight, increasing the food supply's vulnerability to weather disasters,
says Abdolreza Abbassian, secretary of the Intergovernmental Group on
Grains at the UN Food and Agriculture Organization (FAO).

"The current low stocks for both wheat and maize are a reason for
concern because even small shocks could cause panic and speculation in
international markets and contribute to price volatility," said Gary
Eilerts, programme manager of the Famine Early Warning Systems Network
(FEWS NET).

Maize supplies are tight because of the 2012 drought in the US, the
world's largest maize exporter. Drought in Russia in 2012 has also
affected the global wheat supply. "Prices will remain high in the
coming months and [are] vulnerable to evolving global market
conditions," said Eilerts.

Regionally, Southern Africa - where maize is the main staple - is the
most dependent
on maize imports, says Liliana Balbi, team leader of FAO's Global
Information and Early Warning System (GIEWS). "Several countries rely
on imports from the sub-region's main producer and exporter, South
Africa, where prices reflect trends in the international market in
addition to internal supply/demand conditions."

Expensive maize in South Africa in the second half of 2012 has led to
high prices, particularly in Lesotho and Swaziland. But "rising maize
price trends in other countries, such as Malawi and Mozambique mainly
reflect domestic dynamics," she said.

"North African countries, highly dependent on maize imports for the
feed industry, have also faced higher import bills. However, extensive
food subsidies in place limit the price transmission to consumers,"
said Balbi.

In Eastern Africa, Kenya and Somalia rely mostly on the regional export
markets, such as Uganda and Tanzania, Balbi explained, so they are
unaffected by the international markets.

Wheat exports from the US have also been affected, as some of its wheat
has been locally diverted as a substitute for maize to feed animals.

"The current low stocks for both wheat and maize are a reason for
concern because even small shocks could cause panic and speculation in
international markets and contribute to price volatility"
Though high, global maize and wheat prices have remained stable thanks
to increased supplies from southern hemisphere countries, like
Argentina, Brazil and South Africa, which harvest in the second half of
the year.

Emergence of the south: The future of cereal prices is not necessarily
bleak. "I am very excited about the resumption of large wheat exports
from India - which is about 6.5 million tons - and record maize
shipments from Brazil of 22 million tons that are easing the global
grain supply/demand situation," said Abbassian.

"India and Brazil have played pretty important roles in international
commodity markets as net exporters this year. It will definitely be
interesting to see how their export position evolves in global staple
food markets," said Eilerts.

Lower global stocks of wheat have also been offset by higher stocks in
Iran, South Korea and Ukraine, according to the US Department of
Agriculture .

Phasing out fuel subsidies: Eilerts added that he is keeping an eye on
countries phasing out fuel subsidies, such as Malawi, Nigeria and
Zimbabwe.

Malawi is already dealing with the repercussions of replacing its fuel
price subsidies with "automatic fuel price adjustments", in which
prices automatically reflect changes in global fossil fuel prices,
explains economist Charles Jumbe, of the Centre for Agricultural
Research and Development in Malawi.

Private traders of maize, the country's staple, are transferring the
now-record high costs of fuel to consumers.

There is considerable global pressure on indebted developing countries,
from both financial institutions and development bodies, to remove
fossil fuel subsidies. More than US$500 billion worth of fossil fuel
subsidies are provided by governments every year, according to the UN
20> . "Fossil fuel subsidies drain public resources, drive global
warming and make it harder for clean energy to compete. In fact, fossil
fuel subsidies are 500 percent larger than the subsidies provided for
clean energy," said the UN.

Cameroon, Chad, Guinea and Nigeria have all moved towards cutting fuel
subsidies. There is increasing pressure on Ghana from its own central
bank to remove subsidies.

Malawi: The price of maize in Malawi is up by an average of 20 percent
from December 2012 to January 2013. The prices are 69 percent "higher,
on average, than their respective January 2012 levels," said Eilerts.

"In Malawi, prices of maize, in nominal terms, reached new records in
January 2013 that were 25 percent higher than the previous record in
February 2009," said FAO's Balbi.

These prices have been
driven up by a variety of factors. The Malawian economy experienced two
major shocks in 2012, Eilerts points out: an initial 50 percent
devaluation and subsequent depreciation of the Malawian currency, the
kwacha, and a production shortfall in the southern region of the
country. These increased the costs of imported fuel and fertilizers,
decreasing the cost of locally produced commodities like maize.

The kwacha, which had depreciated by almost 100 percent against the US
dollar by the end of 2012, made Malawi's maize attractive to buyers in
neighbouring Tanzania and Mozambique, which had poor experienced
harvests. The high demand has caused the maize price to skyrocket in
Malawi, even in spite of an export ban. (The removal of the country's
fuel subsidies has also had an impact on maize prices.)

Government regulations have helped keep maize in the country, but
efforts to control prices do not work, said economist Jumbe: "In
theory, the government sets producer prices, but on the ground, supply
and demand forces play a major role. "

geID=201302151328310354&width=490>
Photo: Jaspreet Kindra/IRIN
Global maize supplies are tight
The flow of maize from the country's National Food Reserve Agency also
does "not appear to provide a cushion from the high-flying maize prices
as expected," he says.

Rains in the next cropping season, from October 2013 to May 2014, will
be critical to help the country's stocks. But cash transfers and
targeted food assistance by the government, the UN and partners are
helping to ease the situation.

Rice in the Sahel: Global rice stocks are adequate, and prices in the
major exporting countries are either stable or declining, says Eilerts.
This has helped markets in the Sahel
-one-million-in-2013> , where rice is consumed in larger quantities
than the rest of Africa. Governments, particularly in Niger and
Senegal, are also providing input subsidies to boost local rice
production and enabling periods of duty-free rice imports, he added.

"With that said, imported rice prices have gradually increased in
Mauritania and Ghana since 2011, due to the persistent depreciation of
the Mauritanian ouguiya and the Ghanaian cedi between July 2011 and
December 2012. Some price increases of imported goods, such as rice,
occurred in Mauritania, also as a result of continued increases in fuel
prices, which make transport of foodstuff costly."

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